Businesses could benefit from an injection of up to £7bn if a reduction in VAT is announced as part of the Autumn Statement
Research from commercial insurer NFU Mutual has found that over a third of people likely to increase their spending would be doing so on grocery shopping and a further 30 per cent would spend on eating out.
A cut in VAT by 5 per cent could provide the average UK adult with extra spending power of £547 per year. With research showing that 67 per cent of consumers would increase some spend as a result of VAT savings and 36 per cent of these increasing spending on food and drink, manufacturers and retailers could look forward to a potential cash injection of up to £7bn.
Paul Shattock, food and drink sector specialist at commercial insurer NFU Mutual said, “The encouraging sign is that there is clearly enthusiasm for increased spending on food and drink amongst consumers, which could indicate desire for high quality or luxury items.
“With consumer spending coming under some pressure from rising inflation, the Chancellor’s decision to ‘reset’ fiscal policy could possibly include the option of cutting VAT by as much as 5 per cent to support growth. Our research suggests that even in a more probable situation of a 1 per cent cut, up to £1.4bn could be ploughed into British food and drink sector business. With other announcements such as increased infrastructure spending seen as more likely, whether this opportunity can be delivered to customers and benefit UK businesses remains to be seen.
“There is however no guarantee that the spending power of consumers will be ploughed back into UK businesses. Our research also showed increased online spending in 24 per cent of people, which could include spending on imported goods from around the world. While the overall Autumn Statement is expected to support growth, any boosts such as a cut in VAT could also be offset by increases in other taxes, meaning that savings aren’t necessarily felt.”